LSE takeover

[jmreeve]

There has been a great deal of news regarding the take-over of the LSE by Deutsche Bourse
or Euronext.

I thought it would be interesting to gather the opinions of people on this board as to what this might mean for traders on these exchanges.

One possible advantage is that it might be the beginning of the end for the excessive 0.5% stamp duty charged in the UK as this would look out of place in a pan-euro exchange.

Also wondering what will become of the trading systems as SETS is very different from the Deutsche Bourse trading platform and quite different from the Euronext.
I think Euronext have an advantage in that they have already managed to integrate several exchanges.

I would personally prefer Euronext to get the LSE as this would put UK stocks and equity derivs all under one exchange. Also think Euronext will have not have protective policies like the German exchanges and this must be good for London.

 

[theknifemac]

jmreeve

Not sure it will make much difference on stamp - other European exchanges have similar taxes, thinking mainly of the Swiss exchange SWX, but this doesn't apply when traded on VirtX as it is a London based exchange due to TradePoint I believe. It would take more than that for Mr Brown to relinquish his claim on the money I'm afraid.

Stew

 

[jmreeve]

Yes, taxation is down to the Governement but I was wondering if this sort of pan-euro harmonisation
might put up the pressure to change UK stamp duty on stocks.

The other issue is that the UK listed stocks would be the only ones trading in £.
It would probably be easier to merge the German markets with Euronext than merge
London with anything else.

I am also not sure if any of the other European exchanges have the peculiar set up with RSPs
that exists for the London market either.

 

[theknifemac]

Yes, taxation is down to the Governement but I was wondering if this sort of pan-euro harmonisation
might put up the pressure to change UK stamp duty on stocks.

The other issue is that the UK listed stocks would be the only ones trading in £.
It would probably be easier to merge the German markets with Euronext than merge
London with anything else.

I am also not sure if any of the other European exchanges have the peculiar set up with RSPs
that exists for the London market either.

Yup not sure what they will do with the SEAQ and SETSmm stuff. The currency shouldn't be an issue though. Technically I have always preferred SETS to Xetra and both of them to Euronext - in my experience Euronext had more problems that either of the other exchange platforms. Will be interesting to see who wins, and it would be nice if stamp disappeared. How about a get rid of stamp but everything in Euros offer from Big Gord ?

Stew

 

[jmreeve]

Yup not sure what they will do with the SEAQ and SETSmm stuff. The currency shouldn't be an issue though. Technically I have always preferred SETS to Xetra and both of them to Euronext - in my experience Euronext had more problems that either of the other exchange platforms. Will be interesting to see who wins, and it would be nice if stamp disappeared. How about a get rid of stamp but everything in Euros offer from Big Gord ?

Agree the Euronext reliability record is awful and Xetra is a great deal better.
It wouldn't be a bad thing to restructure the UK market as the current situation where a lot of private
investor orders get routed to RSPs and don't actively participate in setting the price is far from ideal.
Without this I think the spread on London stocks would reduce further. Proabably optimistic to think
that the RSPs will let this happen.

 

[theknifemac]

True

Luckily never had to do much with the RSP. I had hoped with the introduction of SETSmm they would eventually move everyone over the electronic order books, and leave the ability to trade 'upstairs' when doing size or speaking directly to one of the market makers. It is a little difficult moaning to my US friends that their market is antiquated and should be fully electronic when our one is in a similar state in some ways.

I did read an interesting article on ederivatives which said the LSE race was pretty close but they thought the Germans had first mover advantage. Interesting how they have to keep their own shareholders happy plus the LSE ones. I just wish the LSE had bought LIFFE when they had the chance.

Stew

 

[jmreeve]

I did read an interesting article on ederivatives which said the LSE race was pretty close but they thought the Germans had first mover advantage. Interesting how they have to keep their own shareholders happy plus the LSE ones. I just wish the LSE had bought LIFFE when they had the chance.

I read the same article.
Euronext managed to steal LIFFE from under the LSE's nose which was a disaster that the LSE
has not managed to recover from. I think the covered warrants were an attempt to create their
own derivatives cash cow but it don't think it has bee that successful.

The problem with Frankfurt is that it would like to be the financial centre of Europe but isn't.
Merging with the LSE will mean a shift of power one way or the other and I cannot see Frankfurt wanting a shift towards London which a takeover would require. Euronext have an advantage in that they don't really care.

 

[theknifemac]

Yes I can see Euronext with headquarters in London being more likely that Deutsche Borse being hq'd in London. Hell even their name suggest they are a little more forward thinking. Perhaps they will win, move to London and use SETS and bin all their existing platforms. And then again perhaps not. Oh well should be an interesting few months.

Six years ago, when I started with one of the big US IBs who were small over here, we made the decision to wait until there were a couple of European exchanges before developing direct links. We decided instead to use a french routing network instead (argh). Every couple of years we re-assessed the situation and not much seemed to change. OK we could trade some Scandi stuff through SAX, could trade Dutch, French and Belgian through one connection, but all the brokers were local to one market so didn't have the ability to clear / settle on the domestic exchanges outside their own market. So until they sort that out its all a bit academic.

Stew

 

[jmreeve]

Euronext already have LIFFE in London and this seems to have worked out O.K (apart from reliability)
SETS will be a nightmare to merge with any other platform as it so many UK market quirks built into it.
For this reason it will almost certainly not be adopted by a combined exchange.

Clearing is one of the biggest issues and my understanding is that quite a bit of the Frankfurt clearing business would move to London is the takeover went ahead. This is bound to wrankle with the with the
people in Frankfurt that would like it to be the uber financial centre of Europe.

I think whichever way it goes it will be messy and disruptive to many people.